Problem 2 Consider the following financial statements for San Diego Nursing Home Inc., a for-profit, long-term care facility San Diego Nursing Home Inc Statement of Income and Retained Earnings Year Ended December 31, 2019 Revenue Resident services revenue $3,163,258 Provision for bad debt 110,000 Net resident services revenue 3,053,258 Other revenue 106,146 Total revenues $3,159,404 Expenses Salaries and benefits $1,515,438 Medical supplies 966,781 Insurance and other 296,357 Depreciation 85,000 Interest 206,780 Total expenses $3,070,356 Operating income $89,048 Income tax expense 31,167 Net income $57,881 Retained earnings, beginning of year $199,961 Retained earnings, end of year $257,842 San Diego Nursing Home Inc. Balance Sheet December 31, 2019 ASSETS Current assets Cash Short-term securities Net accounts receivable Supplies Total current assets Property and equipment Less: Accumulated depreciation Net property and equipment Total assets LIABILITIES Current liabilities Accounts payable $105,737 200,000 215,600 87,655 $608,992 2,250,000 356,000 $1,894,000 $2,502,992 206,780 $72,250 Accrued expenses Notes payable Current portion of long-term debt Total current liabilities Long-term debt Total liabilities SHAREHOLDERS' EQUITY Common stock, $10 par value Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 192,900 100,000 80,000 $445,150 $1,700,000 $2,145,150 $100,000 257,842 $357,842 $2,502,992 a. Perform a DuPont analysis on San Diego Nursing Home Inc. Assume that the sector average ratios are as follows: Total margin Total asset turnover Equity multiplier Return on equity 3.5% 1.5 2.5 13.1% b. Calculate and assess the following ratios. Hint: complete the following table. Ratio calculation Assessment Return on assets Current ratio Average collection period Debt ratio Total asset turnover ratio Times interest earned ratio Sector average 5.2% 2.0 19 days 71% 1.1 2.6